Understanding types of credit scores: A guide to FICO®, VantageScore® & more

Usually, when people discuss credit scores, one usually comes to mind: the FICO® score. But did you know there are many more? In fact, FICO® itself has 20 different versions, and FICO® is not the only model that exists. Another main score is VantageScore®.

But is checking just one or two scores enough? Which ones do you have access to? What is considered a good credit score? Let’s dive into these questions as we try to understand why there are so many different credit scores and how these scores impact us and our finances.

Why are there so many different types of credit scores?

Different credit scores are used for different purposes. You can think of them as industry-specific credit scores that help lenders make better decisions on whom to lend money to, with the goal of reducing their risk of losses. For example, if you are buying a car, some banks might use a FICO® Auto Score 9, but when you apply for a credit card, they might use a FICO® Bankcard Score 8.

The specific credit score models used in different lending scenarios can change over time as new models are developed and evaluated. For instance, entities that set standards within the mortgage industry may, from time to time, evaluate and approve new credit scoring models, including models like VantageScore® 4.0, for use in evaluating mortgage applicants, reflecting the evolving landscape of credit risk assessment.

The Two Main Credit Scoring Models.

Before we get into different examples of credit scores, it’s important to understand what goes into a credit score and what doesn’t. This also can help you understand the differences in the two main credit scoring models, FICO® and VantageScore®.

FICO® Scores

FICO® has been the most widely used scoring methodology for a long time. The most common score is FICO® Score 8, but because FICO® scores use different scoring metrics, your score could change if a different metric is used.

For example, FICO® Score 9 treats unpaid medical collection accounts differently than other types of unpaid collection accounts. This means unpaid medical debts will have less impact on FICO® Score 9. Meanwhile, the new FICO® Score 10 T adds “trended bureau data” as opposed to simply the most recent financial data.

VantageScore®

VantageScore® is a newer player to the field. It was launched in 2006 as a partnership between the three big credit reporting agencies, Equifax™, Experian™ and Transunion™. In comparison, FICO® was created in 1956. VantageScore® is gaining in popularity.

VantageScore® is a bit different than FICO® as it uses six factors as opposed to the typical five. VantageScore® includes “available credit” as a factor, which looks at how much you have available to you on your revolving credit lines.

Decoding Your Credit Score Range.

It’s important to understand how your credit score impacts you. Let’s first look at what a good credit score is.

What is a good credit score?

What is considered a good credit score varies by model. Below are a few examples of the ranges of credit score values.

As you can see, they are just a little bit different.

What credit score do I need?

Now, it’s important to remember that each lender sets their own requirements for when to lend you money or provide you with a service. You may have a good FICO® Score 8 of 700 but your lender might require a credit score of 750 to be considered for a particular type of loan. But a different lender might only require 690.

For a conventional home loan, a common minimum credit score is 620. An FHA loan with a 3.5% down payment requires a minimum credit score of 580, but if you have a 10% down payment the credit score requirement can decrease to 500.

For a VA loan, there is no true minimum credit score required, but many lenders look for a credit score of 620.

That’s why it’s important to shop around and know your options.

What credit scores can you see?

Before we discuss which credit scores you can see, let’s review the difference between a credit score and a credit report.

Your credit report is the financial data that goes into calculating your credit score, including the debt you have, how long accounts have been open, and history of payments. You can access your free credit reports at Annual Credit Report Opens in a New Window.‍ ‍ ^{See note 1} And yes, I said “reports,” plural, because each of the three credit reporting agencies can have different files, so you need to check each one for accuracy.

The credit bureaus get your credit score by taking the financial data in your credit report and plugging it into their long calculation. And voila, out comes your number.

How can you see your credit score? Often, credit card companies will let you see your credit score when you have their credit card. Or you can get it directly from the credit reporting agency, but you might have to pay. For example, you can sign up at Experian™ and see your free credit report and FICO® Score 8 model. But another credit reporting agency might provide a different credit score, like the VantageScore® 3.0.

Keep in mind that your lender may use a different model than the one you have access to, which means the number you see may not be the number they are using to make their lending decision.

Another way to check your credit score is to pay for a credit monitoring plan. But again, remember the score that you see might not be the exact credit score used by your lender.

What about joint credit?

Applying for joint credit, like when you and your spouse buy a home, can add complexity. Each lender can view things differently and different states may have different rules. Before we get into some considerations, let’s focus on the important question: How is your joint score calculated?

Both of your credit scores matter, but when it comes to buying a home, lenders often use what is called the “lowest middle score.” Since your credit score can vary between each of the three bureaus, the lender would take the lowest middle score, as the name implies.

For example, let’s say these are your credit scores:

• Spouse 1: 740, 735, 719
• Spouse 2: 725, 705, 699

Using the lowest middle score methodology, the lender would use 705 as the credit score for your joint credit.

Should we apply for joint credit?

As in most financial decisions, the answer is that it depends on your financial situation, what you are trying to purchase, and each person’s credit history.

If one spouse is unable to qualify for a home using only their income, a joint application could be the way to go. That way, both spouse’s incomes can be counted. But then again, both credit scores are as well, which could affect your ability to get a loan.

What if one spouse’s credit score is bad and using it would cause the couple to not qualify? Or, what if that spouse had a ton of debt in their name and it would make the couple’s debt-to-income ratio too high? These might be reasons to only apply for the mortgage in the name of one spouse.

That’s why it’s important to ask questions. Understand each person’s credit score, ask how the lender views each person’s financial information, and know what it will take to qualify for the mortgage you are attempting to get.

How Do Credit Scores Affect You?

Credit scores can affect you in many ways, from qualifying for a loan to even getting a job. Military members might discover they can’t get or could lose their security clearance due to a poor credit score. With that in mind, let’s look at what you can do to change your credit score.

Can I impact just one credit score?

All credit scores use the same financial information (yours) so you can’t affect just one score. For example, missing three credit card payments in a row will have an impact on your credit scores across the board, not just on one. But it can impact credit scores differently. For example, payment history makes up 35% of a FICO® score but 40% of the VantageScore® 3.0.

What this means to you is that positive credit actions will have an positive impact on all your credit scores. If you pay down your credit card, lowering your credit utilization, that will help increase all credit scores, not just one. But, again, in different amounts. Credit utilization, or the amounts you owe, makes up 30% of a FICO® score, but only 20% of VantageScore® 3.0.

This is positive news as it means you simply need to focus on positive credit behaviors and then begin to reap the credit score benefits. It may take time, but you can see improvement. But the next question becomes, what are positive credit score behaviors?

These are simple steps like:

• Pay your bills on time.
• Reduce debt, which improves your debt-to-income ratio and reduces your credit utilization.
• Don’t routinely apply for new credit. This would be a hard inquiry on your credit, which lowers it for a period of time.

Also, if you’re eligible, consider using USAA’s Credit Toolbox™. It can help give insight into your credit score and factors impacting it. Combine that information with insights from viewing your entire credit report and you can make a plan to take positive steps that can improve or protect your credit.

Can I ask the lender to use a particular score?

Each lender chooses which model they want to use, so you can’t request a specific one. So what can you do? Continue to take the positive credit actions we mentioned earlier so you can try to have the best credit score possible.